Abstract
SMEs have become beacons of hope towards improving economic growth and development of many countries globally. However, the literature documents a high discontinuance rate among small businesses. The purpose of this study is to investigate the impact of ethical practices on the performance of SMEs in South Africa. The study was based on a quantitative research design. The survey method was used as a data collection method. Using this method, self-administered questionnaires were used as the primary data collection tool. These questionnaires were hand delivered to the participants by the researcher. The random sampling method was used to obtain the participants. The population consisted of SME owner/managers in Polokwane municipality. 74 SME owner/managers participated in the survey. Data analysis included descriptive statistics, factor analysis, T tests and regression analysis. The Cronbach’s alpha was used as a measure of reliability. The findings showed that SMEs display unethical behavior and a weak performance. It was discovered that SMEs does not have policies in place to guide their ethical behavior. The T test results showed significant differences between gender and education levels with ethical practices of SMEs. The regression results showed that there is a positive relationship between ethical practices and performance of SMEs. Recommendations were made for SMEs to treat ethical issues seriously lest they risk incurring costs associated with lawsuits and negative brand reputation.
Highlights
Small businesses are increasingly becoming important key players towards economic prosperity of nations across the globe (Peprah, Mensah & Akosah, 2016)
In South Africa, the National Small Business Act of South Africa 1996 as amended in 2003 defines a small business as “a separate and distinct entity, including cooperative enterprises and non-governmental organizations managed by one owner or more, including its branches or subsidiaries if any is predominantly carried out in any sector or sub-sector of the economy mentioned in the schedule of size standards, and can be classified as an small and medium enterprises (SMEs) by satisfying the criteria mentioned in the schedule of size standards” (Government Gazette of the Republic of South Africa, 2003)
It can be hypothesized that there is a significant relationship between ethical practices and performance of SMEs
Summary
Small businesses are increasingly becoming important key players towards economic prosperity of nations across the globe (Peprah, Mensah & Akosah, 2016). According to Dada (2014), there is no universally acceptable definition of SMEs. in South Africa, the National Small Business Act of South Africa 1996 as amended in 2003 defines a small business as “a separate and distinct entity, including cooperative enterprises and non-governmental organizations managed by one owner or more, including its branches or subsidiaries if any is predominantly carried out in any sector or sub-sector of the economy mentioned in the schedule of size standards, and can be classified as an SME by satisfying the criteria mentioned in the schedule of size standards” (Government Gazette of the Republic of South Africa, 2003). This definition tallies with international standards as it employs both the qualitative and quantitative definitions. Ilegbinosa and Jumbo (2015) point out that globally, SMEs contribute immensely towards the gross domestic product (GDP). Firoozmand, Haxel, Jung and Suominen (2015) highlight that SMEs are the economic backbone in the U.S SMEs play an important role in most developing countries by creating jobs for both the urban and the rural populace (Kongolo, 2010)
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